SILVER

While the May silver contract attempted some upside action overnight, it generally remained well within the prior session's trading range and that would seem to suggest the silver trade is in need of fresh guidance from the Fed, or from the US equity markets. Unlike gold, silver has been unable to forge a recent pattern of higher highs and higher lows and that in turn would seem to suggest that silver isn't as upbeat on the potential for additional US easing as if a portion of the gold trade. With recent noted weakness in copper prices, it is also possible that silver is tracking with the industrial metals sector and that would explain a portion of the recent divergence between gold and silver prices. Therefore silver might take some direction from earnings news from Alcoa later today, as the fear of global slowing and more specifically the fear of slackening physical demand for commodities, has been a focal point for silver and copper traders this week. In a partially concerning development, the silver market continued to see a rise in silver exchange stocks, with Comex Silver Stocks yesterday afternoon, rising to 140.059 million ounces, with a single day gain of 539,505 ounces. Comex Silver Stocks are now at the highest level since 08/06/2008. Silver stocks have increased in 13 of the last 20 days. Silver looks to take most of its direction today from classic physical commodity market factors, but the action in the US equity market might have some influence on silver prices today. The silver market remains vulnerable to near term declines, as the fear of slowing physical demand remains in place but silver prices are being periodically supported by hopes that the Fed might be poised to provide assistance in the event that more US slowing is seen. In other words, both gold and silver recently have been underpinned by hopes that the Fed will ultimately step in and bail out a slumping US economy. Gold in particular has benefited more than silver from the hope of help, but some players will suggest that silver prices would have extended last week's slide in prices significantly, if the gold market wasn't able to put a bullish spin on the potential action from the Fed. Therefore we think the path of least resistance is pointing downward in silver prices and it could be difficult for May silver to avoid a return to last week's lows down around $30.98.